USD/JPY and 143 in the Hands of Household Spending and China Trade

Highlights

• It is a busy day ahead for the USD/JPY, with household spending numbers from Japan and China trade data in focus.
• Later in the session, US trade data and Fed chatter will also need consideration.
• The near-term technical indicators are bullish, signaling a return to 143.

On Monday, the USD/JPY rose by 0.56% to wrap up the day at 142.485. Talk of the Japan Government unlikely to further intervene in the FX markets to prop up the Yen and the Bank of Japan Summary of Opinions weighed on the Yen.

This morning, household spending figures from Japan will draw interest. With the Bank of Japan facing the risk of a pickup in inflationary pressure, a surge in household spending could question the Bank’s ultra-loose stance. Economists forecast household spending to increase by 0.3% in June.

Inflation remains a bugbear for central banks globally. However, the Bank of Japan has remained ultra-loose, increasing the risk of sticky inflation. A pickup in domestic consumption would fuel demand-driven inflationary pressures.

From elsewhere, trade data from China will also need consideration.

The US Session

US trade data will be in focus later in the day. However, the numbers are unlikely to influence the Fed and, therefore, the dollar.

The US trade – GDP ratio stood at 25.48% in 2021 and, importantly, is not a Fed focal point, limiting the impact of US trade data on the US dollar.

However, investors should monitor the news wires for Fed chatter with the media. Hawkish commentary would support the USD/JPY.

USD/JPY Price Action

Daily Chart

The Daily Chart showed the USD/JPY above the 141.9 – 141.2 support band. After the bullish Monday session, the USD/JPY remained above 50-day (140.746) and 200-day (137.182) EMAs, sending bullish near and longer-term price signals.

Notably, the 50-day EMA pulled further away from the 200-day EMA, affirming the bullish trend.

Looking at the 14-Daily RSI, the 55.06 reading signals a bullish outlook, supporting a return to 143 and a look at the 144.3 – 145.0 resistance band. However, a USD/JPY fall through the 141.9 – 141.2 support band would bring the 50-day EMA (140.746) into play.

4-Hourly Chart

Looking at the 4-Hourly Chart, the USD/JPY faces strong resistance at 142.5. The USD/JPY sits above the 141.9 – 141.3 support band and the 50-day (142.025) and 200-day (141.232) EMAs, sending bullish near and longer-term price signals. Significantly, the 50-day EMA pulled away from the 200-day EMA, signaling further gains.

A hold above the 50-day EMA and the 141.9 – 141.2 support band would support a return to 143 to give the bulls a run at the 144.3 – 145.0 resistance band. However, a fall through the 50-day EMA (142.025) would send the USD/JPY through the 141.9 – 141.2 support band and bring the 200-day EMA ($141.232) into play.

The 14-4H RSI reading of 51.37 sends moderately bullish signals, with buying pressure outweighing selling pressure. Significantly, the RSI aligns with the 50-day EMA, supporting a run at the 144.3 – 145.0 resistance band.